MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

MARK1012 Lecture 4
Introduction to Marketing Strategy Marketing Environment Marketing Research

Consumer and Business Market

Segmentation And Targeting

Mohammed A Razzaque

Lecture Objectives
1.

Providing a basic understanding of consumer and business market behaviour.

a. b. c.

Outline the major characteristics affecting behaviour in these markets, and list factors that influence them. Explain the buying decision process in these markets and compare and contrast them . Identify and define the various consumer buying roles.

2. 3.

Illustrate different types of buying decision behaviour. Explain the basics of the buyer decision process for new products.
a.

Identify stages in the adoption process

4.

Identify the differences between business markets, institutional markets and government markets.

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AModelofConsumerBuyingBehaviour
The consumer market
All the individuals and households who buy or acquire goods and services for personal consumption.

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How consumers make their choices among products depends on the following factors
EXTERNAL INFLUENCE Cultural Culture Subculture Social Class Marketing programs Marketing objectives Marketing strategy Marketing mix Personal Age & lifecycle stage Occupation Education Economic situation

Social Household type Reference groups Roles & status

Consumer BUYER DECISION PROCESS Lifestyle

Psychological Motivation Perception Learning (memory) Beliefs & attitudes Personality & self-concept Environmental influences Economic Technological Political INTERNAL CHARACTERISTICS
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Buyers responses oProduct service & category selection oBrand selection oReseller selection oPurchase timing & repurchase intervals oPurchase amount
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MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

CULTURAL FACTORS
CulturereferstoThesetofbasicvalues,perceptions,

wantsandbehaviourslearnedbyamemberofsociety fromfamilyandotherimportantinstitutions.
Amajorinfluenceonourwantsandgeneralbehaviour. Marketersneedtoidentifyculturalshifts,ortrends,thatmay impactondemandfortheirproductsandservices.
Examples:thetrendtowardhealthierlifestyles,andincreasing concernforenvironmentalissues.

Globalmarketersmustadapttothecultureanddevelop marketingstrategyaccordingly.

Culturalgroups>>Subcultures Socialclass>>Relativelypermanentandordered

divisionsofsociety ahierarchyofsorts.
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SOCIAL FACTORS
Social factors, such as the consumer's household

type and reference groups, as well as social roles and status influences buying decisions
companies must take them into account when designing

their marketing strategies.

Groups Membership groups. Reference groups. Opinion leaders Roles and Status

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Social and group forces are the most basic influence on a person's values, priorities, and beliefs. Social class
determined by a combination of occupation, income, education, wealth and other variables.

Subculture
distinct groups within the larger culture that have identifiable patterns of behaviour.

Social and group forces

Reference groups

Family and households

Family of orientation (parents), renting units (associational groups) and family of procreation (spouse and children) are the most basic reference groups.
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PERSONAL FACTORS I
1. 2.

Age and LifeCycle Stage Changes in buyers age and family structure over time affect their choices. Occupation Carries with it distinct consumptive needs and their own subcultural norms and values that influence buyer behaviour.

White collar workers need different clothes than blue collar workers.

3. 4.

Economic Situation For almost everyone, buying behaviour is determined by financial means. Education People with higher education levels tend to hold positions that influence dress standards and such purchases as computers and reading materials.
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MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

PERSONAL FACTORS II
5. Consumer lifestyle: A persons pattern of living as expressed in his/her activities, interests and opinions.
PsychographicsThetechniqueofmeasuringlifestylesand

developinglifestyleclassifications;itinvolvesmeasuringthe majorAIO dimensions(Activities,Interests,Opinions).

Lifestylecapturessomethingmorethanjustsocialclassor

personality.Itprofilesapersonswholepatternofacting andinteractingintheworld.
InAustralia,theRoyMorganResearchCentreconducts

researchintoconsumeropinionsandtrends.Whenused carefully,thelifestyleconceptcanhelpthemarketerto understandchangingconsumervaluesandhowtheyaffect buyingbehaviour.

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PERSONAL FACTORS III

Personalityandselfconcept:Theuniquepsychological

characteristicsthatleadtorelativelyconsistentandlasting responsestoourenvironment.Selfconceptisonesselfimage:
Complex;closelytiedtomotivation:usuallydescribedintermsofself

confidence,dominance,sociability,autonomy,defensiveness,adaptability andaggressiveness. Usefulforanalysingconsumerbehaviour:hasbeenappliedtobrands peoplehaveatendencytogiveproductsandbrandshumancharacteristics (Fivebrandpersonalitytraits:sincerity,excitement,competence, sophisticationandruggedness). Consumersaremorelikelytochoosebrandswithpersonalitiesthatmatch theirown.TheImaMacadspersonifyingthebrandwithahuman characterillustrateApplesstrategytoassignthepersonalitytraitsof coolnessandyouthfulnesstotheMac.
Inordertounderstandconsumerbehaviourthemarketermustfirst

understandtherelationshipbetweenselfconceptandpossessions.
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MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

PSYCHOLOGICAL FACTORS
Motivation Perception Learning Beliefs and
The internal urge directing a person to do

something to satisfy that urge

Why? What am I really seeking?

When buying something we ask

Attitudes

What needs am I trying to satisfy?

A person has many needs at any given

time.

Motivation Theories

Sigmund Freud: people are largely unconscious about the real psychological forces shaping their behaviour. Abraham Maslow sought to explain why people are driven by particular needs at particular times and developed the need hierarchy.
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PSYCHOLOGICAL FACTORS I: MOTIVATION

Motivation Maslow's Theory of Motivation discusses motivation.

Self
Actualization

Self-Esteem

Need states vary in their intensity or motivation.

Belongingness

Safety

Physiological

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PSYCHOLOGICAL FACTORS II:

PERCEPTION & LAERNING

Perception :Theprocessbywhich peopleselect,organiseand interpretinformationtoforma meaningfulpictureoftheworld.

Ouractionsareinfluencedbyour perceptionofthesituation.

PerceptualProcesses

Learning refersto changesinbehaviour arisingfromexperience. Learningtheoryhelps marketersbuilddemand byassociatingaproduct withdrives (strong

internalstimulusthatcalls foraction),using motivatingcues (minor stimulideterminingwhen, whereandhowone responds) andproviding

SelectiveAttention:exposedto many,rememberafew SelectiveDistortion:interpretto supportviewsheld SelectiveRetention:remember thingstosupportattitudesand beliefs

positivereinforcement.

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PSYCHOLOGICAL FACTORS III: BELIEFS AND ATTITUDES Beliefs refer to the assumptions and convictions that are held to be true, by
an individual or a group, regarding concepts, events, people, and things. A belief is an internal feeling that something is true, even though that belief may be unproven or irrational.
I believe that walking under a ladder brings bad luck, or I believe that there is life after death.

Incorrect beliefs about product or brand image can block sales.

An attitude refers to the predisposition or a tendency to respond positively or negatively towards a certain idea, object, person, or situation . An attitude is the way a person expresses or applies their beliefs and values, and is expressed through words and behaviour.

I get really upset when I hear about cruelty to children and animals, or I hate school.

People acquire their beliefs and attitudes through acting and learning.
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TRICOMPONENT ATTITUDE MODEL

Affective Emotional responses such as liking or disliking.

Cognitive Beliefs and attitudes not influenced by emotion.

Conative Intention to purchase or purchase itself.

ATTITUDE

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MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

Various Factors and Consumer Decision Making Process

EXTERNALINFLUENCES
Culture Subculture Demographics Social Status Reference Groups Family Marketing Activities

Experiences and Acquisitions

SITUATIONS Problem Recognition Information Search Alternative Evaluation and Selection Outlet Selection and Purchase Postpurchase Dissonance SITUATIONS

INTERNAL INFLUENCES
Perception Learning Memory Motives Personality Attitudes

SELF CONCEPT Desires And LIFESTYLE Needs

Experiences and Acquisitions

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Consumer Decision Making Process Need recognition

Problems are recognised when people sense a difference between an actual state and some desired state.
effort varies from heightened awareness corresponding to increased receptivity for relevant information to active information search modes where the person expends some energy to obtain. compares product attributes of the alternatives against degrees of importance each attribute has in meeting needs, beliefs about the product.

Information search

Evaluation of alternatives

Purchase decision
Involves comparing the expected performance of the product against the perceived performance received. Results in cognitive dissonance .
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involves deciding to buy or not to buy.

Postpurchase behavior
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MARK1012: Marketing Fundamentals Lecture 4: MOHAMMED RAZZAQUE

Step 1: Need Recognition

Need Recognition
Difference between actual state and desired state External Stimuli Internal Stimuli
Hunger Thirst A persons normal needs TV Advertising Print Ad Radio Ad Internet Stimuli from Environment

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Step 2 : Information Search

Personal Sources Commercial Sources Public Sources Experiential Sources

Family, Friends, Neighbours Most Influential sources of information Advertising, Salespeople, Mass media Consumer rating groups Examining/Handling the product Using the product

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Step 3: Evaluation of Alternatives

Product Attributes
Evaluation of Quality, Features and price

Degree of Importance
Which of the attributes is the most important?

Brand Beliefs
What is the belief about each of the available brands?

Total Product Satisfaction

Given the expectations about the products, what is the likely degree/extent of satisfaction?

Evaluation Procedure
Choosing a brand based on one or more of the attributes
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Step 4: Purchase Decision

Purchase Intentions Desire to buy the most preferred brand

Attitude of others

Unexpected situational factors

Purchase Decision

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Step 5: Postpurchase Behaviour

Consumers Expectation of Products Performance

Products Perceived Performance

Satisfied Customer

Dissatisfied Customer

Cognitive Dissonance
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Post-purchase behaviour: Cognitive Dissonance

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Consumer Buying Roles

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Roles and Status - each relationship of a person with his or her group carries with it certain roles and status carrying consumptive responsibilities. People play several roles initiator; influencer; decider; buyer;and user in the buying process at any time.

Consumer Buying Roles

User Initiator

Buyer

Key Family Decision Roles

Influencer

Decider

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Kotler Brown Adam Armstrong

Marketing 5 th Ed Copyright 2001 Pearson Educatio n Australia

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Types of Consumer Buying Decisions

Routine Response Behavior
Little involvement in selection process Frequently purchased low cost goods May stick with one brand Buy first/evaluate later Quick decision
e.g. Softdrink, ballpoint pen, petrol,

Limited Decision Making

Low levels of involvement Low to moderate cost goods Evaluation of a few alternative brands Short to moderate time to decide e.g. clothing

Extensive Decision Making

High levels of involvement High cost goods Evaluation of many brands Long time to decide May experience cognitive dissonance
House, car, camera, some clothing, choice of accountant or doctor.

Less Involvement
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More Involvement
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The Buyer Decision Process for New Products

A new product is a good, service or idea that is

perceived by some potential customers as new. There are five Stages in the Adoption Process Awareness; Interest; Evaluation; Trial; Adoption Individual Differences in Innovativeness People differ greatly in their readiness to try new products. Some are Innovators of the new technology, some are early adopters, some early majority, some late majority and some are laggards.

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The buyer decision process for new products Stages in the adoption process

Trial Evaluation Interest Awareness

Adoption

Copyright 2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442531109/Kotler/POM/5e
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Influence of Product Characteristics on Rate of Adoption

the degree to which an innovation appears superior to existing products
the degree to which the innovation fits the values and experiences of potential consumers.

Relative Advantage: Compatibility: Complexity: Divisibility: : Communicability:

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the degree to which the innovation is difficult to understand or use. the degree to which the innovation may be tried on a limited basis. the degree to which the results of using the innovation can be observed or described to others.
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BUSINESSTOBUSINESS MARKETS
Business markets are all the organisations that buy goods and services to use in the production of other products and services or for the purpose of renting them to others at a profit.
Types of Business Markets
Market Structure and Demand

The industrial market. Those who buy to make other products and services that are sold, rented or supplied to others. The reseller market. Those who acquire goods for the purpose of reselling or renting them to others at a profit. The institutional and government market. Government units - federal, state and local that purchase or rent goods and services for carrying out the functions of government.

Other Character istics

Character istics of Business Markets

Nature of Buying Unit

Types of Decisions and Decision Process

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Characteristics of Business Markets

In some ways business markets are similar to consumer markets. Both involve people who assume buying roles and make purchase decisions to satisfy needs. However, business markets also differ in many ways from consumer markets.

Market Structure and Demand 1. Fewer buyers 2. Larger Buyers 3. Close supplier-customer relationships 4. Geographically concentrated buyers 5. Derived demand 6. Inelastic demand 7. Fluctuating demand
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Nature of buying unit

1. 2.

Professional purchasing Several buying influences

Types of Decisions and Decision Processes

1. 2. 3. 4.

More complex and formalised decisions Direct purchasing Reciprocity Lease

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A Model of Business Buying Behaviour

The Environment

The Buying Organisation

The Buying Centre Buying Decision Process

Buyers Response
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Source:Kotler, Brown, Adam, Armstrong; Marketing, 5th Edition; Prentice Hall

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A Model of Business Buying Behaviour

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BUSINESS BUYER BEHAVIOUR I Major Types of Buying Situations

Straight Rebuy. The buyer reorders
something without any modifications. Modified Rebuy. The buyer seeks a change in specifications, prices, terms, or suppliers. New Task. Here the company is buying the product for the first time and faces the greater costs and risks.

Straight Rebuy

Types of Business Buying Situations

Modified Rebuy

New Task Buying

Systems buying and selling. The buyer seeks a packaged solution to a problem from a single seller who offers
a set of interlocking products and the coordination, implementation, and control procedures for operating them.
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Types of Buying Situations

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BUSINESS BUYER BEHAVIOUR II

Participants in the business buying process

Users are members of the organisation who will use the product. Users Influencers are people who affect the Gatekeepers buying decision. Buyers are those with the formal authority to select suppliers and to Buying Centre arrange terms of purchase. Deciders Influencers Deciders have the formal or informal power to select or approve the final suppliers. Buyers Gatekeepers are those who control the flow of information to others.
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Major influences on Business Buying

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Stages in Business Buying Process I

Problem Recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order Routine Specification Performance Review

Source:Kotler, Brown, Adam, Armstrong; Marketing, 5th Edition; Prentice Hall

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STAGES IN BUSINESS BUYING PROCESS II

Problem Recognition can result from internal or external stimuli; [emerge from an identified shortage or ideas for improvements recognised by buyers General Need Description describes the overall characteristics and quantities of the needed item. Product Specification requires that a team must translate general needs into product specifications. An engineering value analysis team may look at alternative designs to reduce production costs. Supplier Search conducts a search for the best vendors meeting specifications. Proposal Solicitation invites qualified suppliers to submit proposals covering the terms of supply and support. Supplier Selection selects suppliers based upon a combination of technical competence and service record and reputation. OrderRoutine Specification specifies the details of the supplier's contract listing technical specifications, delivery terms, policies for return and warranties, and quantities needed. Performance Review will review how the supplier contract is working for the company and may continue, amend, or drop the seller.
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Comparison of Business & Consumer Buying Situations

BUYING STEP 1 Need or problem recognition 2 General need description 3 Product specification 4 Information / supplier search 5 Proposal solicitation 6 Supplier selection 7 Order-routine specification 8 Post-purchase performance review

INDUSTRIAL Anticipates Extensive Precise / technical Extensive Formal Extensive Calculated re-order Extensive comparisons and benchmarking

CONSUMER Reacts Limited Benefits Limited Verbal Limited analysis Not routinised Little comparison

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